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Euro zone aristocracy transfixed in 'Eurothink'

Thu, 2011-08-18 00:03 — Tigerquoll

Europe's current debt crisis has been blatantly caused by well known financially reckless governments. But the problem of the reckless is being allowed to drag down sound responsible economic states into bailing out the financially reckless ones. Why?
Why dig a bigger hole? The only benefit offered is to maintain unity for unity sake. But the 'rescue package' repeatedly talked about does not address the underlying causes of the financial problem, nor entail removing the culpable captains of the reckless spending and borrowing. It is past time to cut the tether to prevent the ship sinking.

Ireland, Portugal, Greece, Spain and Italy have all but become insolvent sovereign states. Since their respective governments allowed their debt to spiral out of sovereign control, they have breached the European governance standards of being sovereign members. They should be declared bankrupt and expelled from the European Economic Community.

But do reckless governments have a representative right of the people to make responsible decisions? No. So the vote needs to be democratic.
The vote is one of direct democracy.

But government aristocrats have no democratic right to commit their people to external debt, with a plebiscite. Going guarantor for the hundreds of billions of unpayable debt of these countries means raising taxes, and sovereign financial exposure (bonds) to another countries debt.

The euphemism 'rescue package' is misleading.

Germany needs to get out quick or be dragged into a spiral of uncontrollable debt.
No responsible leader in Europe has yet postulated the ultimate risk scenario for Europe, but it is very real. Is it worse for insolvent member countries to be expelled from the EEC, or for Europe to financially collapse outright?

Europe's government aristocracies are transfixed in 'Eurothink' and the people recognise this whole issue as patently anti-democratic.
When it comes to ultimate risk, the consequences for group-think decision-making, risk becoming catastrophic.

Comments

Dear Tigerquoll,
Thanks for this article, but please look at the other main article on this problem, The US Dollar as a weapon: debt and devaluation," which was posted on August 7th, 2011 by admin. It gives a context for how wierd it is to have the US force the rest of the world to maintain its profligacy (overspending) whilst every other country is expected to submit to austerity and give up its public assets and people to give up self-government control over their affairs.

"The decline in the value of the US dollar is engineered by the US government in order to make US products more affordable and to relaunch their manufacturing economy. The world is trapped by the US into subsidising its debt on account of the very large market it represents and the control over the money markets of US corporate investors. Other economies with higher value currency will experience a falling off in sales because the goods they produce will be less affordable on the world market. Hans-Peter Martin and Harald Schuman wrote about this 'trap' late last century. Read what they wrote then and consider how well it explains our current situation." More here: The US Dollar as a weapon: debt and devaluation."

I agree that Euro zone decision makers have become transfixed in 'Eurothink' but I disagree with your analysis.

1) Europe's current debt crisis has NOT been blatantly caused by financially reckless governments. One could argue that these governments have been financial recklessly borrowing for decades prior to joining. It takes two to trade. To create the present situation we need to add a single currency PLUS reckless lenders to feed the reckless borrower, and Euro institutions that allow and mismanaged these trades. The Euro is badly designed and its flaws are exploited (but by who?)

2) The so-called rescue packages don't seem to be saving any particular country but are designed to save and protect banks - 'too big to fail' . I can't see any one in Greece or Germany benefiting from these packages - so who wins? Moral hazard can be applied to the lender as well as the borrower.

3) Modern Money is formed by debt -creation. Sovereign debt (what our children have to pay / what our children will received) becomes a serious problem when (1) there is no limit on debt creation (a lack of an effective central bank) and (2) the distribution of that debt changes (in the Euro zone fuelled by the need to finance trading imbalances).

4) Government have the democratic right to commit their people to external debts if they are transparent and accountable. Here we could use the idea of odious debts (http://journal.probeinternational.org/odious-debts/). Again it takes two to make a corrupt deal - briber and the bribe-taking.

5) The present set of global austerity measures are suitable candidates for 'groupthink'. Deflation benefits creditors rather than borrowers; likewise inflation benefits debtors rather than creditors. So I would argue that the current round of austerity measures are not interest of German or Greek voters. 'Groupthink' is to think inflation is the main danger during a deflation period.

I agree with some of your conclusions but arrive there from a different direction - see my blog - http://redesigning-the-foot.blogspot.com .

In response to Cheshire Cat, financially reckless governments have betrayed their people.
The plethora of news, analysis and anger on this issue cannot be read by hiding under a rock.
I have replied by way of an article.